Changes to Wills, Property, Savings & Inheritance Taxes

Sam Orgill  Summers over - time to review for Expats

Cyprus Moves and Changes

In July the tax law was changed.  Then the government announced the changes.  Later some of the changes (still proposals) will be enacted in September, after the holidays.  This has caused some confusion and delay as the news crept out.  All will become clear…..

This article addresses some of the implications and changes in hand for Expats living and working abroad or investing overseas in Cyprus Property and Business.  There is also a big impact in tax saving for offshore investment and the real bonus of a new Inheritance Tax planning strategy with a statutory basis.

The objective of the changes are to attract new overseas investors in Cyprus Property and Business.  Whether you are living and working abroad, retired or investing offshore, Expats should review their Wills, Property, Business and Inheritance Tax positions to take advantage of the new rules and tax savings.

Domicile of Choice

Cyprus call tax on savings ‘Defence levy’ and charge on Interest 30%, Dividends 17% and Rental Income 3% plus Income Tax. The new rules are designed to keep the taxes for Cypriots but give tax savings for Expats.

To do this Cyprus has introduced a statutory definition of Domicile.  This involved changing Will and Succession law to extend the definition of Domicile.  Internationally Domicile is defined as where you are from.  Normally this is a domicile of origin where you were born. In the past it was hard to change, but, the Cyprus change allows a statutory definition for a domicile of choice.  This allows Cypriots and Expats to change.

To make a domicile of choice your country of tax residence becomes relevant. To change from a Cyprus domicile a Cypriot must be a tax resident outside Cyprus for 20 years. To change to a Cyprus domicile you must be a Cyprus tax resident for 17 out of 20 years

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Paying EU Savings Taxes – Defence Levy

Under the new law from July if you are NOT Cyprus Domicile but you ARE tax resident in Cyprus then you do not pay Defence Levy Savings Taxes on Bank Interest, Dividends, and Property Rental earned outside Cyprus. (You may pay tax at source though)

This not only makes investment portfolios more profitable, it also offers the opportunity for direct investment overseas without investment wrappers and expense.

Suddenly Cyprus is a very competitive tax residence for Expats with Investment and property portfolios.

Inheritance Tax Savings Too

UK Expats still face a 40% Inheritance tax on their estate on death because of their domicile of origin – UK.  The new Cyprus law allows British and other nationals to establish and prove a domicile of choice of Cyprus – by 17 out of 20 years tax residence. 

With Cyprus Domicile of choice the Inheritance Tax is 0%.  

The catch of course is that as a Cyprus Domicile then the laws of succession are fixed by law, and children and spouse have a statutory share of inheritance. There is also a scenario that potential beneficiaries could challenge a Will to receive benefits on first death i.e. children before widow.

Property Change.

Just as radical are the proposed Property changes due September to be covered in more detail in a later article.  Troika driven, the stranglehold of banks on title deeds, through developer mortgages, will be removed.  Title deeds will be passed to buyers without the consent of the bank to release the developer debt.  This is coupled with changes to allow banks to repossess and sell property where the mortgages are not being paid.  Auctions or repossessions are already booked for September.  This may create new challenges for those caught out with the mortgage excesses over the last decade.

What is clear is that Property rental income earned outside Cyprus from July 2015 is no longer taxable in Cyprus for Expats who are Cyprus Tax residents.

There are also capital gain tax exemptions and reductions in Property Purchase Tax by 50%

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Tax Saving Tips for Expats This Month:

  1. Review your Cyprus Returns for 30% Defence Levy Cyprus Tax Savings
  2. Review your Investment and Savings for Tax Efficiency
  3. Review your Will – How will Domicile Effect Beneficiaries?
  4. Make a Will for 40%  Inheritance Tax Savings
  5. Make a Will for different Jurisdictions and avoid forced heirship
  6. Does your current Will reflect your intentions?
  7. Review for 23% Property Rental Tax Savings
  8. Look out for Property Investment Savings in new Cyprus Auctions
  9. Consider Cyprus Property Investment for 20% Capital Gains
  10. Consider Cyprus Property Investment for 50% Transfer Tax Savings

Look Forward – Plan Ahead

ProACT expat experts offer tax saving for people living and working and investing abroad.  We offer a Free Review for any tax saving issue – property, business, pension, investment.

ProACT can also assist and offer Free Review and Make a Will, provide updates or revisions as required follow the changes to inheritance tax and domicile.

We are Expat Experts for UK & Cyprus Tax Returns & Rebates. Find out more at our website. Contact Us for a Free Review. Contact Us Say Hello !!         ProACT Web Site 

Sam Orgill - ProACT Partnership - Tax Saving Experts


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